NZ dollar heads for 0.6% gain this week as US jobs report awaited; RBNZ looms

Friday 5th June 2015

The New Zealand dollar is heading for a 0.6 percent gain this week as investors wait for upcoming US employment figures to gauge whether the Federal Reserve will hike interest rates this year, and ahead of next week's local monetary policy review.

The kiwi rose to 71.40 US cents at 5pm in Wellington from 71 cents on Friday in New York last week. It traded at 71.14 cents at 8am, and 71.30 cents yesterday. The trade-weighted index was little changed at 74.69 from 74.73 last week, and up from 74.48 yesterday.

Economists expect the US added 225,000 jobs last month, ahead of the release of the May non-farm payrolls report on Friday in Washington. Employment growth in the world's biggest economy has been relatively robust through a slow first quarter, though wage growth has been slow in a global environment of low inflation. The US labour market remains a key piece of data for analysts when trying to gauge whether the Fed will shift away from running its policy of a zero interest rate, and chair Janet Yellen last month indicated the world's biggest central bank will probably start tightening policy this year.

"Markets are relatively comfortable taking the Fed at their data-dependent word, and the information we'll receive tonight is fairly important on the data dependent side of things," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "The market's expected 230,000 jobs, which is relatively strong and should support the US dollar and keep US dollar bills in the ascendency."

Investors will turn their attention to the Asia-Pacific next week with the Reserve Bank's policy review on Thursday. Traders are pricing in a 44 percent chance governor Graeme Wheeler will cut the 3.5 percent official cash rate as inflation continues to come in below expectations, and as another weak GlobalDairyTrade auction this week puts pressure on dairy prices, the nation's biggest commodity export.

New Zealand's two-year swap rate slipped to 3.05 percent at 5pm in Wellington from 3.36 percent yesterday, and the 10-year swap rate decreased to 4.06 percent from 4.08 percent.

Other data investors will be watching include New Zealand's first-quarter manufacturing, May property values, and May electronic card spending, Australian employment figures, a speech by Reserve Bank of Australia governor Glenn Stevens, and a glut of Chinese reports covering inflation, retail spending, investment, and trade.

The kiwi gained to 92.67 Australian cents from 92.20 cents yesterday, and rose to 4.4319 Chinese yuan from 4.4203 yuan.

The local currency advanced to 63.65 euro cents from 63.28 cents after the International Monetary Fund agreed to delay a scheduled repayment of a loan by Greece, and was little changed at 46.46 British pence from 46.52 pence after the Bank of England yesterday kept policy unchanged.

The kiwi increased to 88.89 yen at 5pm in Wellington from 88.75 yen yesterday.

BusinessDesk.co.nz

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